Millennials Have Low Credit Scores: Here's What They Can Do About It

Have you heard? Millennials have the worst credit scores of any generation. The data point plays well with one of Americans’ favorite pastimes: discussing the dismal state of the nation’s youngest consumers.

The average 19- to 34-year-old has a credit score of 625, but it’s 650 for Gen X (35-49), 709 for baby boomers and the Greatest Generation (together, those generations include everyone older than 50). The national average is 667. The data comes from credit bureau Experian and uses the VantageScore 3.0 credit score range, which goes from 300 to 850.

Yes, millennials have the lowest average credit score of American adults, but that statistic is neither surprising nor helpful. Building a good credit score takes time, and having poor credit as a young person doesn’t mean you’ll always have poor credit. It’s like a bad haircut: You have to deal with it for a while, figure out how to make it work while it’s in the awkward stages, but eventually, by staying patient and resisting making decisions that can make a bad situation worse, it’ll grow out. (That works both ways: Having a great credit score now doesn’t mean you always will, just like someone with a great hairstyle can easily be set back with a poorly timed buzz cut.) We explain what a good credit score is here.

If you don’t have any credit to your name, it’s not impossible to get a credit card with no credit, but you’ll likely have to start with something like a secured credit card. If you use them smartly, credit cards can be great credit-building tools.

So, young people with not-so-great credit, here’s what you can do to improve your situation.

Pay Your Bills on Time

If you have credit cards or loans (student loans, probably), make the payments on time. Your payment history has the greatest impact on your credit scores. Setting your bills to autopay is a great way to ensure that happens, but you need to make sure you have enough money in the bank to cover those bills, and you also need to check to make sure the payments go through.

Keep Your Credit Card Balances Low

According to the Experian data, millennials had the lowest average credit card balance of any generation: $3,403. (National average is $5,340.) At the same time, millennials used more of their available credit than any other generation: 43%. (National average is 34%.) This indicates that millennials, on average, have lower credit limits than older consumers, so whether or not millennials can afford their credit card bills is irrelevant — what matters is that balance-to-limit ratio, which should be as low as possible if you want a good credit score.

It’s called credit utilization. Many experts say that keeping your credit card balances to less than 30% of your available credit is beneficial to your credit scores; 10% or lower is even better.

Be Patient

Gen X, baby boomers and the Greatest Generation have an advantage over millennials — time. The average age of your credit accounts plays a significant role in your credit scores (the older, the better), and even the most responsible young person can’t do much in that area if she’s only had access to credit for a few years.

Time has indirect consequences, too: The older you are, the more time you’ve had (theoretically) to save a down payment for a home and pay down education debt. Perhaps you’ve also had enough time to leave the financial mistakes of your 20s behind you.

Anyone who wants to improve his or her credit needs to recognize the value of patience, because building a great credit score typically doesn’t happen quickly. Doing the basics right, like paying bills on time and keeping your debt low, will help you establish a positive credit history, and the longer you maintain those habits, the better your score should get. Age only has so much effect on credit; it’s really about knowledge and decision-making.

You can be a millennial with excellent credit. You can also be a retiree with really bad credit — it’s all in how you manage things. Throughout your life, your credit scores will go up and down, and even if you encounter a financial disaster or two, you always have the opportunity to rehabilitate your credit standing. Wherever you stand now (you can get two free credit scores on Credit.com), use that knowledge to inform your financial decisions going forward, so you can build better credit and experience the benefits.